Why Dick's Sporting Goods stock jumped 50 percent in 2016

What happened

Shares of Dick's Sporting Goods (NYSE: DKS) jumped out of the gym last year, gaining 50% according to data from S&P Global Market Intelligence. The bankruptcies of a number of rival sporting goods chains allowed Dick's to benefit, and it grabbed market share and profits. As the chart below shows, the bulk of the gains came in the middle of the year, shortly after Sports Authority announced its liquidation.

So what

Among the sporting goods chains to declare bankruptcy last year were Sports Authority, City Sports, Golfsmith and Vestis Retail Group, which owned Eastern Mountain Sports, Bob's and Sport Chalet.

Their collapses were driven both by the fact that their market niche had become saturated in recent years due to overexpansion, and by competition from e-commerce. Dick's was able to scoop 31 Sports Authority store leases in addition to the brand name, spending about $23 million, and it acquired Golfsmith for $70 million, taking over 30 stores, which it plans to convert to its Golf Galaxy brand.

As a result of the bankruptcies, same-store sales jumped 5.2% in the third quarter -- its most recently reported period -- and Dick's expects a full-year increase of 3% to 4%.

See young Americans' favorite brands:

24PHOTOS

Millennials' favorite retail brands

See Gallery

Millennials' favorite retail brands

24. Levi's

23. Calvin Klein

Photo via Getty

22. Ralph Lauren

21. Michael Kors

Photo via Getty

20. Walmart

Photo via Shutterstock

19. Macy's

18. Vans

17. Old Navy

Photo via Shutterstock

16. Converse

15. Adidas

Photo via Shutterstock

14. Gap

13. Under Armour

Photo via Getty

12. Bath & Body Works

Photo via Getty

11. Nordstrom

10. Target

Photo via Alamy

9. Urban Outfitters

8. J.Crew

7. H&M

6. Sephora

Photo via Shutterstock

5. Lululemon

Photo via Getty

4. Zara

Photo via Getty

3. Forever 21

Photo via Shutterstock

2. Victoria's Secret

Photo via Getty

1. Nike

Up Next

See Gallery

Discover More Like This

HIDE CAPTION

SHOW CAPTION

of

SEE ALL

BACK TO SLIDE

Now what

Earlier in the year, Dick's profits actually took a hit as liquidation sales at its rivals took a toll on its sales, but as its third-quarter performance showed, the company has gotten past that, and should produce strong growth over the next few quarters. Management raised full-year guidance in its most recent report, calling for adjusted EPS in the $2.99 to $3.11 range. Analysts expect that to grow by more than 20% in 2017.

While the bankruptcies of its rivals could signal trouble for Dick's down the road, the company seems set up for strong profit growth at least through this year.

10 stocks we like better than Dick's Sporting Goods
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Dick's Sporting Goods wasn't one of them! That's right -- they think these 10 stocks are even better buys.